Why You Should Invest in NLSN
This article was written by Charlie Waters. Charlie has been in the online content world for over 25 years as a freelance writer, covering a wide variety of topics.
As an investor, you should track as many companies as possible to be able to spot attractive opportunities.
The key to actually making money through investing is arguably patience. Patience in the sense that when you invest in something that you have determined is a wise investment, you stick to it, even if it doesn’t generate a profit straight away.
So logically, it follows that one could just invest in a certain number of stocks and then allow their value to grow, instead of constantly selling old holdings to buy new shares. And this is a good strategy in a sense, but the stock market can also be unpredictable.
You need to be careful about your decisions before you actually commit to anything. It’s not as simple as deciding on a few stocks at random, buying those shares and expecting to see a good return, you need to make intelligent choices and invest in companies with attractive fundamentals and cheap valuations.
This is why our discussion brings us to Nielsen Holdings (NLSN), which has stable revenue, high margins, and an attractive valuation.
Before we discuss why NLSN is an attractive opportunity, it’s important that you are familiar with something known as ‘value investing’. It’s a specific approach, one that works, but that isn’t necessarily used by every investor.
In simple terms, value investing is a strategy that involves investing in stocks that don’t appear on the surface to be attractive but are actually selling for less than their intrinsic value.
It’s really quite similar to looking out for sales and discounts while shopping for clothes or electronics. You are looking to buy something at a price that is lower than its true value. But in this case you do need to do a bit of detective work.
In order to determine whether or not is stock is attractive, despite a downward trending stock chart, you have to estimate what it’s intrinsic value actually is. You can do this by reviewing a variety of different valuation factors.
These include the price-to-book value (P/B) which compares the value of the company’ assets to its stock price. The price-to-earnings value (P/E) which compares a company’s stock price to its current earnings.
And then the Price/Sales (P/S) ratio can also be considered, which is a significantly more difficult statistic to manipulate than most valuation metrics.
If these factors seem attractive in spite of an apparently down trending stock, then the stock could be undervalued, which makes it a prime target for value investors. This is a strategy that works, it’s similar to how David Tepper turned Appaloosa Management into such a titanic entity.
He focused on distressed bonds which ultimately appreciated in value and became massively profitable investments. And now Appaloosa Management is one of the most successful hedge funds in the world.
So now consider NLSN, which is a firm that specializes in information, data and measurement. It’s the company that’s been behind American television viewing habits and demographic ratings for decades now.
From a few different valuation metrics, NLSN is an appealing option for value investors. Let’s consider it in relation to a few of the metrics that we discussed above.
The current P/E ratio for NLSN is 10.4, which is significantly below what it’s midpoint has been over the last 5 years. It is also trading at a large discount to the S&P 500 Index.
Similarly, it’s P/S ratio is currently at about 0.87 and has declined steadily since 2016. This is further evidence that the stock is inexpensive.
NLSN has been trending downwards since 2016, and it’s unlikely that the trend will reverse immediately. This is where the patience we discussed earlier is going to come in.
As we have established, NLSN is undervalued. While it’s impossible to know how long it will take for the stock to appreciate, odds are that it will with time.
Value investing is in many ways a waiting game, but one that pays off if you have patience.
Charlie has been in the online content world for over 25 years as a freelance writer, covering different topics – Usually, those are financial topics and also sustainability – a great and long-awaited field. What is he doing when not writing? Charlie learned how to enjoy long walks, playing chess, and finally – how to sleep at night!